On Wednesday, December 17, 2014, Governor McAuliffe presented his proposed amendments to the 2015/2016 Biennial Budget. You may recall that late last spring, the Governor and General Assembly dealt with an unexpected budget shortfall, due to a significant overestimation of revenue. In total, the shortfall for the biennium was estimated to be $2.4 billion. The Governor and General Assembly took immediate action to deal with the bulk of the shortfall last spring, with an understanding that scheduled revisions to the revenue assumptions would guide the additional belt tightening necessary going forward.

You may further recall that as part of the budgetary actions last spring, nursing facility rate inflation for the second year of the biennium (State Fiscal Year 2016 - begins July 1, 2015) was deferred. However, for the most part, the hard-fought gains to Medicaid reimbursement of nursing facilities in the form of rebasing/inflation were kept intact, resulting in approximately $80 million ($6.61 per day for 2015; $6.52 for 2016) in additional funding for nursing facilities through Medicaid – this was a major victory for nursing facilities in the face of a perilous revenue situation for the Commonwealth.

Going into the Governor’s public release of his proposed amendments, approximately $272 million in spending reductions still needed to be specified, and it was not clear where these savings would come from. Happily, we are able to report that they did not come in the form of any additional reduction to reimbursement under Medicaid. Unfortunately, we cannot report that the 2016 inflationary adjustment has been restored; we remain vigilant on pursuing that restoration should the revenue situation of the Commonwealth improve in any meaningful way.

In addition to the information on reimbursement levels, there were a couple of other amendments of interest to our membership proposed by the Governor:

Authorization to DMAS to expand eligibility under the PPACA (aka, Medicaid Expansion): While this does not have a measurable direct impact on nursing facility services, it is important to note that the Governor did not use the “savings” associated with expanding Medicaid to offset the revenue concerns articulated above. This means that if the General Assembly does not approve this amendment, that disapproval does not create a budget hole that the General Assembly must fill.

Authorization to pilot a provider assessment on hospitals: The language authorizes DMAS to develop a pilot program implementing a provider assessment (sometimes called a provider tax) of up to 6 percent of revenue levied on hospitals. No less than 35 percent of the hospital funds are to be deposited in Health Care Fund (which funds Medicaid in Virginia) with the remainder utilized to supplement various hospital reimbursement streams. This proposal does not affect nursing facilities. This is a Medicaid finance approach that has historically been avoided in Virginia and there is no indication at this time that the Commonwealth’s stance on this approach is likely to change.

Increase in the Auxiliary Grant: Effective January 1, 2015, the rate would be increased to $1,219 (from $1,207). The monthly personal care allowance did not change (currently $82 per month).

Keep in mind that all of this represents proposed amendments; the General Assembly will have its input prior to these being effective.